Meredith Corporation Reports Strong Results for the Second Quarter and First Six Months of Fiscal 200626 January 2006
Meredith Corporation (NYSE: MDP) today reported that second quarter earnings per share increased 12 percent to $0.58 from $0.52 in the prior-year. (All references to fiscal 2005 earnings per share in this release are before the cumulative benefit of a change in accounting principle related to option expensing.) Income from operations grew 14 percent to $55.5 million and earnings before interest, taxes, depreciation and amortization (EBITDA) rose 17 percent to $67 million.
Revenues rose 31 percent to $386 million in the second quarter and advertising revenues increased 32 percent to $232.1 million. On a comparable basis (excluding Parents, Family Circle, Fitness, Child and Ser Padres magazines, which were acquired on July 1, 2005), Meredith's revenues grew 4 percent to $305.4 million and advertising revenues rose 5 percent to $185.2 million.
"We are extremely pleased to report another strong quarter," stated William T. Kerr, Meredith's Chairman and Chief Executive Officer. "We have produced double-digit earnings per share growth in 14 of the last 15 quarters."
For the first six months of fiscal 2006, earnings per share increased 12 percent to $1.10. Income from operations grew 15 percent to $106.7 million and EBITDA grew 18 percent to $129.6 million. Revenues increased 33 percent to $776.2 million and advertising revenues grew 30 percent to $465.4 million. On a comparable basis, the Company's revenues increased 5 percent to $612.3 million and advertising revenues rose 3 percent to $368.6 million.
Meredith's second quarter and first half results were positively impacted by significant magazine advertising gains; the acquisition of the new magazines, which were modestly accretive; and outstanding online advertising and profit growth. "Additionally, our book and integrated marketing businesses continued to perform well," said Kerr. "In Broadcasting, we improved late news audience share at most of our television stations and produced strong non- political advertising revenue growth, which partially offset the cyclical decline in political advertising."
OPERATING HIGHLIGHTS
Publishing
Publishing operating profit increased 50 percent to $37.2 million and revenues grew 47 percent to $301.5 million in the second quarter. On a comparable basis, publishing operating profit grew 19 percent, revenues rose 8 percent and operating profit margin increased more than 1 percentage point.
In the first six months of fiscal 2006, operating profit increased 36 percent to $84.9 million and revenues grew 48 percent to $619.9 million. On a comparable basis, publishing operating profit grew 16 percent, revenues rose 9 percent and operating profit margin increased 1 percentage point.
Advertising revenues grew 58 percent in the first six months of fiscal 2006 primarily due to the addition of the new magazines. On a comparable basis, publishing advertising revenues increased 9 percent. Better Homes and Gardens, Ladies' Home Journal, American Baby, More and Midwest Living delivered strong advertising gains.
Meredith Interactive Media grew revenues more than 80 percent and produced outstanding profit growth in the first six months. This business has grown rapidly in recent years. "We believe interactive media holds significant growth potential as marketing budgets and consumer acceptance continues to shift to interactive," Kerr commented.
The Company's diversified publishing operations produced strong results in the first six months. Meredith Books grew profit and revenues in the high teens. Integrated marketing increased profit in the mid-to-high twenties on mid single-digit revenue growth.
Broadcasting
Broadcasting operating profit declined to $26.3 million from $32.2 million and revenues decreased 6 percent to $84.5 million in the second quarter. For the first six months, operating profit declined to $39.1 million from $46.4 million and revenues decreased 4 percent to $156.3 million. These results reflect the cyclical decline in political advertising, partially offset by gains in non-political advertising of 9 percent in the second quarter and 8 percent in the first six months.
"We were particularly pleased to deliver strong non-political advertising gains at both the local and national level in the first six months of fiscal 2006," Kerr stated. "Local non-political advertising revenues increased 9 percent and national non-political advertising rose 6 percent."
The Company's Cornerstone, Internet sales and other market-specific promotions were important contributors to its strong non-political advertising performance in the second quarter and first six months. Combined revenues from these programs grew 10 percent to more than $10 million in the quarter and 6 percent to nearly $20 million in the first half of fiscal 2006.
The Company grew late news audience share in 6 of its 9 largest markets in the November 2005 rating book for the key adult 25-54 demographic group. Highlights from the November rating book include:
-- The Company's CBS affiliate in Hartford had an outstanding book. It
produced double-digit percent ratings and share gains for nearly every
newscast. It grew sign-on to sign-off share to 19 from 17 and was
number 1 in the market.
-- The Company's CBS affiliate in Atlanta increased ratings for all four
of its newscasts.
-- Meredith's CBS affiliate in Phoenix grew late news share to 9 from
8 and increased overall sign-on to sign-off share to 10 from 9.
OTHER FINANCIAL INFORMATION
Net interest expense increased to $15.6 million in the first six months of fiscal 2006 from $9.9 million in the prior-year period, primarily reflecting a higher average debt balance. Total debt was $595 million at December 31, 2005 versus $300 million as of December 31, 2004 due to the acquisition of the new magazines. The weighted average interest rate was 5.2 percent on December 31, 2005 compared with 6.8 percent on December 31, 2004.
Capital expenditures were $15 million in the first six months of fiscal 2006. The Company repurchased 533,000 shares in the first six months and approximately 615,000 shares to date in fiscal 2006 as part of its ongoing share repurchase program.
All earnings per share figures in the text of this release are diluted. Both basic and diluted earnings per share can be found in the attached statement of earnings.
OUTLOOK
On a comparable basis, Meredith expects Publishing advertising revenues to increase in the low single-digits in the third quarter. Broadcast pacings, which are a snapshot in time and change frequently, are currently up in the high single-digits for the third quarter.
As the Company stated at the beginning of fiscal 2006, it expected earnings per share to grow in the mid teens in the second half of fiscal 2006. Meredith continues to believe earnings per share will grow at this level. This would translate into earnings per share of approximately $0.80 for the third quarter and $2.86 for the full year, or a 14 percent increase from the $2.50 the Company earned in fiscal 2005.
CONFERENCE CALL WEBCAST
Meredith will host a conference call on January 24, 2006 at 10:00 a.m. EST (9:00 a.m. CST) to discuss results for the first six months of fiscal 2006. A live webcast will be accessible to the public on the Company's website http://www.meredith.com .
RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES
Non-GAAP measures such as EBITDA should be construed not as alternative measures of, but as supplemental information regarding, the Company's net earnings and income from operations as defined under GAAP.
Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the Company. Because of EBITDA's focus on results from operations before depreciation and amortization, management believes that EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends. EBITDA is a common alternative measure of performance used by investors and financial analysts. Meredith does not use EBITDA as a measure of liquidity, nor is EBITDA necessarily indicative of funds available for management's discretionary use.
Reconciliations of GAAP to non-GAAP measures are included in Table 1. The attached financial statements and reconciliation tables will be made available on the Company's web site. Interested parties should go to http://www.meredith.com/investors/index.html and click on "GAAP-Non-GAAP Reconciliation" in the navigation bar on the left side of the page.
SAFE HARBOR
This release contains certain forward-looking statements that are subject to risks and uncertainties. These statements are based on management's current knowledge and estimates of factors affecting the Company's operations. Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding broadcast pacings and publishing advertising revenues, along with the Company's earnings per share outlook for the third quarter of fiscal 2006 and the full fiscal year.
Actual results may differ materially from those currently anticipated. Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national, or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss of one or more major clients; the integration of the newly acquired businesses; changes in consumer reading, purchase, and/or television viewing patterns; unanticipated increases in paper, postage, printing or syndicated programming costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the Company's industries; unexpected changes in interest rates; and any acquisitions and/or dispositions. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
ABOUT MEREDITH CORPORATION
Meredith ( http://www.meredith.com ) is one of the nation's leading media and marketing companies with businesses centering on magazine and book publishing, television broadcasting, integrated marketing and interactive media. The Meredith Publishing Group features 25 subscription magazines- including Better Homes and Gardens, Ladies' Home Journal, Family Circle, Parents, American Baby, Fitness and More-and approximately 200 special interest publications. Meredith owns 14 television stations, including properties in top-25 markets Atlanta, Phoenix and Portland, and an AM radio station.
Meredith has approximately 350 books in print and has established marketing relationships with some of America's leading companies including The Home Depot, DIRECTV, DaimlerChrysler, Wal-Mart and Carnival Cruise Lines. Meredith's consumer database, which contains approximately 85 million names, is one of the largest domestic databases among media companies and enables magazine and television advertisers to target marketing campaigns precisely. Additionally, Meredith has an extensive Internet presence that includes 32 web sites and strategic alliances with leading Internet destinations. Meredith Hispanic Ventures publishes five Spanish-language titles, making Meredith the largest Hispanic publisher in the United States.
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings - Unaudited
Three Months
Percent
Period ended December 31, 2005 2004 Change
(In thousands except per share data)
Revenues
Advertising $232,141 $176,421 31.6 %
Circulation 87,697 55,861 57.0 %
All other 66,145 62,271 6.2 %
Total revenues 385,983 294,553 31.0 %
Operating costs and expenses
Production, distribution and editorial 164,393 123,403 33.2 %
Selling, general and administrative 154,548 113,703 35.9 %
Depreciation and amortization 11,533 8,746 31.9 %
Total operating costs and expenses 330,474 245,852 34.4 %
Income from operations 55,509 48,701 14.0 %
Interest income 190 223 (14.8)%
Interest expense (7,904) (5,170) 52.9 %
Earnings before income taxes and
cumulative effect of change in
accounting principle 47,795 43,754 9.2 %
Income taxes 18,642 16,932 10.1 %
Earnings before cumulative effect of
change in accounting principle 29,153 26,822 8.7 %
Cumulative effect of change in
accounting principle, net of tax - 893 (100.0)%
Net earnings $29,153 $27,715 5.2 %
Basic earnings per share
Before cumulative effect of change in
accounting principle $0.59 $0.54 9.3 %
Cumulative effect of change in
accounting principle - 0.02 (100.0)%
Net basic earnings per share $0.59 $0.56 5.4 %
Basic average shares outstanding 49,243 49,912 (1.3)%
Diluted earnings per share
Before cumulative effect of change in
accounting principle $0.58 $0.52 11.5 %
Cumulative effect of change in
accounting principle - 0.02 (100.0)%
Net diluted earnings per share $0.58 $0.54 7.4 %
Diluted average shares outstanding 50,663 51,469 (1.6)%
Dividends paid per share $0.140 $0.120 16.7 %
Six Months
Percent
Period ended December 31, 2005 2004 Change
(In thousands except per share data)
Revenues
Advertising $465,371 $357,175 30.3 %
Circulation 182,580 114,087 60.0 %
All other 128,297 112,154 14.4 %
Total revenues 776,248 583,416 33.1 %
Operating costs and expenses
Production, distribution and editorial 341,154 252,576 35.1 %
Selling, general and administrative 305,490 220,989 38.2 %
Depreciation and amortization 22,912 17,177 33.4 %
Total operating costs and expenses 669,556 490,742 36.4 %
Income from operations 106,692 92,674 15.1 %
Interest income 367 440 (16.6)%
Interest expense (15,924) (10,342) 54.0 %
Earnings before income taxes and
cumulative effect of change in
accounting principle 91,135 82,772 10.1 %
Income taxes 35,545 32,033 11.0 %
Earnings before cumulative effect of
change in accounting principle 55,590 50,739 9.6 %
Cumulative effect of change in
accounting principle, net of tax - 893 (100.0)%
Net earnings $55,590 $51,632 7.7 %
Basic earnings per share
Before cumulative effect of change in
accounting principle $1.13 $1.01 11.9 %
Cumulative effect of change in
accounting principle - 0.02 (100.0)%
Net basic earnings per share $1.13 $1.03 9.7 %
Basic average shares outstanding 49,280 50,090 (1.6)%
Diluted earnings per share
Before cumulative effect of change in
accounting principle $1.10 $0.98 12.2 %
Cumulative effect of change in
accounting principle - 0.02 (100.0)%
Net diluted earnings per share $1.10 $1.00 10.0 %
Diluted average shares outstanding 50,694 51,667 (1.9)%
Dividends paid per share $0.280 $0.240 16.7 %
Meredith Corporation and Subsidiaries
Segment Information - Unaudited
Three Months
Percent
Period ended December 31, 2005 2004 Change
(In thousands)
Revenues
Publishing $301,469 $204,663 47.3 %
Broadcasting
Non-political advertising 83,248 76,119 9.4 %
Political advertising 85 12,201 (99.3)%
Other revenues 1,181 1,570 (24.8)%
Total broadcasting 84,514 89,890 (6.0)%
Total revenues $385,983 $294,553 31.0 %
Operating profit
Publishing $37,178 $24,817 49.8 %
Broadcasting 26,317 32,186 (18.2)%
Unallocated corporate (7,986) (8,302) (3.8)%
Income from operations $55,509 $48,701 14.0 %
Depreciation and amortization
Publishing $4,775 $2,416 97.6 %
Broadcasting 6,114 5,822 5.0 %
Unallocated corporate 644 508 26.8 %
Total depreciation and amortization $11,533 $8,746 31.9 %
EBITDA
Publishing $41,953 $27,233 54.1 %
Broadcasting 32,431 38,008 (14.7)%
Unallocated corporate (7,342) (7,794) (5.8)%
Total EBITDA $67,042 $57,447 16.7 %
Six Months
Percent
Period ended December 31, 2005 2004 Change
(In thousands)
Revenues
Publishing $619,943 $420,241 47.5 %
Broadcasting
Non-political advertising 153,407 141,583 8.4 %
Political advertising 164 18,579 (99.1)%
Other revenues 2,734 3,013 (9.3)%
Total broadcasting 156,305 163,175 (4.2)%
Total revenues $776,248 $583,416 33.1 %
Operating profit
Publishing $84,923 $62,640 35.6 %
Broadcasting 39,068 46,439 (15.9)%
Unallocated corporate (17,299) (16,405) 5.4 %
Income from operations $106,692 $92,674 15.1 %
Depreciation and amortization
Publishing $9,483 $4,761 99.2 %
Broadcasting 12,161 11,315 7.5 %
Unallocated corporate 1,268 1,101 15.2 %
Total depreciation and amortization $22,912 $17,177 33.4 %
EBITDA
Publishing $94,406 $67,401 40.1 %
Broadcasting 51,229 57,754 (11.3)%
Unallocated corporate (16,031) (15,304) 4.8 %
Total EBITDA $129,604 $109,851 18.0 %
Meredith Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
(In thousands) 2005 2005
Assets
Current assets
Cash and cash equivalents $15,093 $29,788
Accounts receivable, net 249,590 176,669
Inventories 56,106 41,562
Current portion of subscription
acquisition costs 83,762 27,777
Current portion of broadcast rights 19,194 13,539
Other current assets 23,487 15,160
Total current assets 447,232 304,495
Property, plant and equipment, net 415,500 398,882
Less accumulated depreciation (218,956) (205,926)
Net property, plant and equipment 196,544 192,956
Subscription acquisition costs 73,472 24,722
Broadcast rights 9,624 7,096
Other assets 70,234 58,589
Intangibles, net 813,090 707,068
Goodwill 430,476 196,382
Total assets $2,040,672 $1,491,308
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $75,000 $125,000
Current portion of broadcast rights payable 23,410 18,676
Accounts payable 46,769 48,462
Accrued expenses and other liabilities 131,469 119,526
Current portion of unearned subscription
revenues 205,051 127,416
Total current liabilities 481,699 439,080
Long-term debt 520,000 125,000
Long-term broadcast rights payable 18,679 17,208
Unearned subscription revenues 176,723 112,358
Deferred income taxes 108,004 93,929
Other noncurrent liabilities 44,298 51,906
Total liabilities 1,349,403 839,481
Shareholders' equity
Common stock 39,687 39,700
Class B stock 9,570 9,596
Additional paid-in capital 61,996 55,346
Retained earnings 585,480 550,115
Accumulated other comprehensive loss (1,025) (1,025)
Unearned compensation (4,439) (1,905)
Total shareholders' equity 691,269 651,827
Total liabilities and shareholders' equity $2,040,672 $1,491,308
Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows - Unaudited
Six Months ended December 31, 2005 2004
(In thousands)
Net cash provided by operating activities $40,043 $54,898
Cash flows from investing activities
Acquisitions of businesses (359,459) (35,262)
Additions to property, plant and equipment (15,005) (9,806)
Proceeds from disposals of property,
plant and equipment - 2,050
Other - (250)
Net cash used in investing activities (374,464) (43,268)
Cash flows from financing activities
Proceeds from issuance of long-term debt 455,000 -
Repayments of long-term debt (110,000) -
Excess tax benefits from share-based
payments 6,269 1,821
Proceeds from common stock issued 9,438 14,861
Purchases of Company stock (26,467) (49,132)
Dividends paid (13,811) (12,000)
Other financing activities (703) (247)
Net cash provided by (used in) financing
activities 319,726 (44,697)
Net decrease in cash and cash equivalents (14,695) (33,067)
Cash and cash equivalents at beginning of
period 29,788 58,723
Cash and cash equivalents at end of period $15,093 $25,656
Table 1
Meredith Corporation and Subsidiaries
Supplemental Disclosures Regarding Non-GAAP Financial Measures
Consolidated EBITDA, which is reconciled to net earnings in the following
tables, is defined as earnings before interest, taxes, depreciation and
amortization.
Segment EBITDA is a measure of segment earnings before depreciation and
amortization.
Segment EBITDA margin is defined as segment EBITDA divided by segment
revenues.
Three months ended December 31, 2005
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $301,469 $84,514 $- $385,983
Operating profit $37,178 $26,317 $(7,986) $55,509
Depreciation and amortization 4,775 6,114 644 11,533
EBITDA $41,953 $32,431 $(7,342) 67,042
Less:
Depreciation and amortization (11,533)
Net interest expense (7,714)
Income taxes (18,642)
Net earnings $29,153
Segment EBITDA margin 13.9% 38.4%
Six months ended December 31, 2005
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $619,943 $156,305 $- $776,248
Operating profit $84,923 $39,068 $(17,299) $106,692
Depreciation and amortization 9,483 12,161 1,268 22,912
EBITDA $94,406 $51,229 $(16,031) 129,604
Less:
Depreciation and amortization (22,912)
Net interest expense (15,557)
Income taxes (35,545)
Net earnings $55,590
Segment EBITDA margin 15.2% 32.8%
Three months ended December 31, 2004
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $204,663 $89,890 $- $294,553
Operating profit $24,817 $32,186 $(8,302) $48,701
Depreciation and amortization 2,416 5,822 508 8,746
EBITDA $27,233 $38,008 $(7,794) 57,447
Less:
Depreciation and amortization (8,746)
Net interest expense (4,947)
Income taxes (16,932)
Net earnings $26,822
Segment EBITDA margin 13.3% 42.3%
Six months ended December 31, 2004
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $420,241 $163,175 $- $583,416
Operating profit $62,640 $46,439 $(16,405) $92,674
Depreciation and amortization 4,761 11,315 1,101 17,177
EBITDA $67,401 $57,754 $(15,304) 109,851
Less:
Depreciation and amortization (17,177)
Net interest expense (9,902)
Income taxes (32,033)
Net earnings $50,739
Segment EBITDA margin 16.0% 35.4%
Source: prnewswire
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